I'm an associate editor at Forbes, reporting on personal finance from my outpost in a Modernist house in New Canaan, Conn. I have a law degree, and I write about how to build, manage and enjoy your family's wealth.
Since I joined Forbes in 1997, my favorite stories have been on how people fuel their passions (historic preservation, open space, art, for example) by exploiting the tax code. I also get into the nitty-gritty of retirement account rules, estate planning and strategic charitable giving. My favorite Forbes business trip: to Plano, Ill. to report on the restoration of Ludwig Mies van der Rohe's Farnsworth House, then owned by a British baron. Live well.
Follow me on Twitter: http://www.twitter.com/ashleaebeling
Send me an email: aebeling@forbes.com

Who Claims Social Security At Age 62?

Deciding when to start taking Social Security benefits is a financial question fraught with intricacies and pitfalls. A new Government Accountability Office report highlighting the factors that lead many Americans to claim Social Security early at age 62—and to forego higher monthly benefits–concludes that it’s important to preserve the choice to take early benefits, but it may be costing some retirees unwittingly. “Increasing life expectancy and time spent in retirement raise the potential cost to retirees of claiming early, and therefore reduced, benefits,” the GAO report says.

Despite the guarantee of higher monthly retirement income for delaying benefits, most workers are still claiming at age 62. How much is at stake? A worker who starts taking Social Security this year at age 62 (instead of waiting until full retirement age of 66) would have his monthly benefit reduced by 25%. An age-62 claimer starting benefits in 2022 (when the full retirement age is 67) would get monthly checks 30 percent below what he would get if he waited to claim until age 67, and 44 percent below what he would get if he waited to get payments until age 70.

Do you know how much it’s costing you if you claim Social Security benefits early? (Photo credit: Wikipedia)

Age 62 is still the most prevalent age for claiming Social Security benefits, although the share of workers claiming benefits at age 62 is dropping. For those born in 1935, about 43 percent of men and 49 percent of women claimed benefits in the first month after turning age 62. But for those born in 1946, the share claiming in the first month after turning 62 declines to about 32 percent for men and 38 percent for women.

Still the large majority of workers claim benefits by the time they reach full retirement age. For those eligible for Social Security benefits born in 1946, few delayed claiming one year or more past their full retirement age (only about 8 percent of men and 7 percent of women claimed at age 67 or later). Full retirement for those born in 1960 and later is 67. You can get even bigger checks if you delay further until age 70.

Who is most at risk? Those who work in physically-demanding blue collar jobs and those who have put in a full 35 years on the job tend to claim benefits early at age 62. Also, a greater share of those who reported being retired, unemployed or otherwise out of the labor force claim early, the report says.

Workers with a blue collar job at age 60-62 were 55% more likely to claim benefits at age 62. Workers who worked at least 35 years by age 60 to 62 were 38% more likely to claim benefits at age 62. And workers with less than a college degree were 23% more likely to claim benefits at age 62.

By comparison, workers employed full-time at age 60-62 were 30% less likely to claim benefits early, and those in a managerial or professional job at age 60 to 62 were 32% less likely to claim benefits at 62.

The report points out the importance of Social Security benefits as providing an “income floor” with a guaranteed income stream, especially in light of pensions that pay lifetime benefits becoming scarce. Workers who have the wherewithal to delay benefits get the guarantee of a higher minimum income floor—regardless of how long retirement lasts. Yet for workers who lack the flexibility to delay claiming, even with reduced benefits, Social Security acts as an important safety net, the report says.

The GAO also looked at new healthcare coverage options under Obamacare (increased access to Medicaid and tax credits for buying health insurance through the exchanges) but says it’s too early to determine the effects the new law will have on the decision to retire early. The full report, Challenges for Those Claiming Social Security Benefits Early And New Health Care Coverage Options, is available here.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.